Question

Which of the following steps is followed in preparing a consolidated statement of cash flows?

A. Eliminate intragroup transactions and combine the cash flow statements.
B. Eliminate intragroup transactions, adjust for non-controlling interests, and combine the cash flow statements.
C. Combine the cash flow statements and eliminate intragroup transactions.
D. Adjust for non-controlling interests and combine the cash flow statements.

Answer 1

The correct step in preparing a consolidated statement of cash flows is to eliminate intragroup transactions, adjust for non-controlling interests, and combine the cash flow statements.

Step-by-step explanation:

The correct answer is B. Eliminate intragroup transactions, adjust for non-controlling interests, and combine the cash flow statements.

When preparing a consolidated statement of cash flows, intragroup transactions need to be eliminated to avoid double-counting. Also, adjustments need to be made for non-controlling interests, which represent the portion of a subsidiary's cash flows that do not belong to the controlling entity.

Combining the cash flow statements is the final step after eliminating intragroup transactions and adjusting for non-controlling interests.